By Mark Huffman
ConsumerAffairs.com
January 15, 2010
The national average price of gasoline continued to climb in the last week, and is now up about a nickel a gallon since last Friday, according to AAA's Fuel Gauge Survey.
According to the report, the average price of gas is now $2.758 a gallon, up from $2.709 a week ago. The price of diesel fuel is $2.923, up from $2.869 a week ago.
"Flashes of optimism over the potential for the economic recovery to begin in earnest in 2010 have certainly played a role in higher prices, as has continuing dollar weakness," said Andrew Delmege, AAA's manager of regulatory affairs. "For much of the past year, dollar weakness has contributed to market oil prices remaining higher than strict supply and demand fundamentals would suggest."
In fact, gasoline prices continue to go up even though U.S. stockpiles of both crude oil and gasoline remain ample. Refineries are still operating well below capacity.
As in 2008, consumers are paying more for gas because of Wall Street traders' enthusiasm for investments in oil. When confronted with a weak dollar, Delmege says, many investors buy commodities such as oil to protect their investments by owning something physical in nature, rather than currency alone.
The most expensive gasoline today is in Alaska, where the statewide average is $3.376 a gallon. Interestingly, that's just a penny a gallon less than it was last week. Meanwhile, the cheapest gas in the nation is in Wyoming, with a statewide average of $2.522 a gallon. That's up more than a nickel a gallon from last Friday.
Californians are paying an average of $3.062 a gallon, with the most expensive gas in the San Francisco market, where motorists are paying, on average, $3.138 a gallon. The cheapest California market for gas is Yuba City, with an average price of $2.993 a gallon.
Sucking Up Spending Power
Are rising gas prices a bad sign for hopes of some kind of economic recovery. If they continue to climb, they could well be, according to Joel Naroff, chief economist for Naroff Economic Advisors, of Holland, Pa., who says its just another reason to believe any recovery will be a slow one.
"This is just sucking additional spending power from households and with the unemployment rate likely to stay high for a number of years, we need every dollar possible to go into consumption," Naroff told ConsumerAffairs.com.
In 2008 gasoline prices zoomed to $4 a gallon by mid year, only to have the economy fall deeper into a recession by the fall. Could it happen again?
"The lessons from the last run up in prices is that people try to maintain spending up until a certain point," Naroff said. "It really looks as if $4.00 per gallon was a back breaker. "
